We Built A ‘Doomsday Momentum Machine.’ Now It’s Blowing Up
During the vicious, tech-led selloff that wiped away a fleeting, post-FOMC bounce in US equities, Cathie Wood's star-crossed flagship fund suffered its worst one-day decline since the onset of the pandemic.
The 9% single-session drop on May 5 brought the product's YTD decline to more than 50% (figure below).
More notable, perhaps, was the lamentable reality that every holding in the Ark Innovation ETF was negative in 2022 with but a single exception: A $4 million cash allocation. It's returned
H or anyone, have you seen any analysis of what rate + growth scenario the market is currently discounting, or sensitivity tables for what market valuations are implied by what scenarios? I imagine the strategists have their juniors busily cranking out that sort of work.
Great summary, H. I still wince, though, every time we succumb to the temptation to compare equity market caps with country GDPs given the wholly different kinds of measurement they represent. Call me a purist.
Yeah, but people love that chart. As a general rule, the more “apples to oranges” a chart is, the more people like it. It’s an extension of the public’s penchant for escapism. The more detached from any kind of reality something is, be it a chart or especially a narrative, the more appealing. It’s unfortunate.
The statistic that gets me even more is the one that compares the total notional value of derivatives from the largest global banks to annual world GDP, putting the ratio of derivative value at over four times total global annual GDP. Somehow all that paper feels a bit like the part of the world’s oceans that we know nothing about.
H-Man, regrettably there is no one on deck who has any experience in fighting inflation. So it becomes an exercise in reading manuals from previous episodes or simply winging it. It seems we are dabbling with both prescriptions while relentlessly holding onto the belief, something will work. By the time we figure out what works, the ship will probably be underwater and it will be time to build a new vessel.
I was around in the 70s and 80s. As I recall, back then we fought inflation by printing “whip inflation now” bumper stickers. Oh– we also raised interest rates through the roof. My father took me to open my first checking account in 1980. It paid 12% interest.